International businesses wanting to enter GCC markets can overcome local challenges through M&A activities.
In a recently available study that investigates the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers discovered that Arab Gulf firms are more likely to make takeovers during periods of high economic policy uncertainty, which contradicts the behaviour of Western businesses. For example, big Arab finance institutions secured acquisitions through the financial crises. Moreover, the analysis shows that state-owned enterprises are not as likely than non-SOEs to make acquisitions during times of high economic policy uncertainty. The the findings indicate that SOEs tend to be more cautious regarding takeovers in comparison with their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, emanates from the imperative to protect national interest and minimising potential financial instability. Furthermore, takeovers during times of high economic policy uncertainty are associated with an increase in investors' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Indeed, this wealth effect highlights the potential for SOEs like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by capturing undervalued target companies.
GCC governments actively encourage mergers and acquisitions through incentives such as for example taxation breaks and regulatory approval as a means to consolidate industries and build regional businesses to become have the capacity to competing on a international level, as would Amin Nasser likely tell you. The need for economic diversification and market expansion drives much of the M&A transactions in the GCC. GCC countries are working seriously to attract FDI by making a favourable ecosystem and increasing the ease of doing business for foreign investors. This strategy is not only directed to attract foreign investors because they will contribute to economic growth but, more crucially, to facilitate M&A transactions, which in turn will play a significant role in allowing GCC-based companies to gain access to international markets and transfer technology and expertise.
Strategic mergers and acquisitions are seen as a way to overcome obstacles international businesses face in Arab Gulf countries and emerging markets. Businesses wanting to enter and grow their reach into the GCC countries face different problems, such as for example cultural distinctions, unknown regulatory frameworks, and market competition. But, if they buy regional companies or merge with regional enterprises, they gain immediate access to local knowledge and study their regional partner's sucess. One of the more prominent cases of effective acquisitions in GCC markets is when a heavyweight international e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce firm recognised as being a strong rival. Nonetheless, the purchase not only eliminated local competition but in addition provided valuable regional insights, a customer base, and an already established convenient infrastructure. Furthermore, another notable instance could be the purchase of an Arab super app, namely a ridesharing business, by the worldwide ride-hailing services provider. The international business obtained a well-established brand name by having a big user base and substantial knowledge of the local transport market and client preferences through the acquisition.